CHINA CITIC BANK CORPORATION LTD (QUANZHOU BRANCH) v. LI KWAI CHUN AND OTHERS

HCMP 1439 & 1408/2017

[2018] HKCFI 362

HCMP 1439/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1439 OF 2017

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MISCELLANEOUS PROCEEDINGS NO 1408 OF 2017

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REASONS FOR DECISION

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1.  I have before me this morning in two related cases six matters (five summonses and one application for adjournment). They are:

  (a) HCMP 1408/2017:

(i) In this action, the plaintiff took out an Originating Summons dated 16 June 2017 for interim relief under sections 21M and 21N of the High Court Ordinance.  The interim relief sought was in effect a Marevainjunction.  The proceedings outside Hong Kong which the interim relief is sought to aid are two judgments dated 17 February 2017 which the plaintiff had obtainedagainst the defendants in the Intermediate People’s Court of Quanzhau City, Fujian Province (“the Mainland Judgments”).  The plaintiff ultimately succeeded in having the Mainland Judgments registered in Hong Kongunder the Mainland Judgments (Reciprocal Enforcement)Ordinance, Cap 597 (“Cap 597”).  I will return to those judgments and the related enforcement proceedings in Hong Kong later;

(ii) Also on 16 June 2017, the plaintiff obtained on an ex parte basis against the defendants a Mareva injunction essentially in the same terms as the injunction sought in the Originating Summons (“the ex parte Injunction”);

(iii) The inter partes summons for the continuation of the ex parte Injunction was also taken out on 16 June 2017 (but filed on 19 June 2017).  It has since then been before the court a number of time, but remains pending.  This is one of the five summonses before me this morning, and will be referred to as the Continuation Summons;

(iv) On 20 July 2017, the defendants took out a summons for the discharge of the ex parte Injunction.  It was amended subsequently and the amended summons was filed on 16 November 2017 (“the Discharge Summons”).  It, together with the Continuation Summons, were before Deputy Judge Seagroatt on 22 November 2017.  Despite the hearing, the Discharge Summons remains pending.  It is the second of the five summonses before me this morning;

(v) On 30 January 2018, the defendants took out a summons for variation of the ex parte Injunction for inter alia provision of legal expenses in various ongoing legal proceedings (“the Variation Summons”).  This is the third summons before me;

  (b) HCMP 1439/2017:

(i) On 21 June 2017, the plaintiff took out an Originating Summons under this action for an Order that the Mainland Judgments be registered under Cap 597;

(ii) on 28 August 2017, Master Hui granted the Order sought (“the Order of Registration”).  It was filed on 11 September 2017;

(iii) After the Notice of Registration of Mainland Judgment dated 13 September 2017 had been served upon the defendants, the defendants took out a summons dated 28 September 2017 for an Order that the Order of Registration be set aside (“the Setting Aside Summons”). This is the fourth summons before me this morning;

(iv) On 30 January 2018, the defendant took out a summons for leave to file and serve a further affirmation (that of Siu Ka Yan) in support of the Setting Aside Summons (“the Further Evidence Summons”).  This is the fifth summons before me;

  (c) Application for adjournment:

On 30 January 2018, Mr Kok, counsel appearing for the defendants, put in his written submissions.  He revealed therein that he (and his instructing solicitors) was on limited instructions only to seek (1) an order in terms of the Variation Summons, and (2) an adjournment of the Continuation Summons, the Discharge Summons and the Setting Aside Summons.  This application for adjournment is the sixth matter before me.

Consideration of the Variation Summons and application for adjournment

2.  The Variation Summons and the application for adjournment are closely connected.  It was submitted on the defendants’ behalf that as a result of the ex parte Injunction, the defendants have been under very tight financial restrictions and have not had sufficient resources to finance the very many legal proceeding that have been going on.  They therefore seek a variation of the ex parte Injunction for provision of legal expenses, and an adjournment during the interim, so that they could properly prepare for the various summonses.

3.  Given the close connection between the two applications, I deem it appropriate to consider them together.

4.  When the ex parte Injunction was first granted, whilst it as usual contained some exceptions under the section “Exceptions to This Order”, it did not specify what sums the defendants could spend towards “their ordinary living expenses, their ordinary and proper business expenses and also on legal advice and representation.”  It only stipulated that “a reasonable sum per week” could be so used.

5.  Apparently, the parties could not agree on what that “reasonable sum” should be.  That led to an application before M Chan J for variation of the ex parte Injunction. That hearing took place on 15 September 2017.  Having heard parties, her Ladyship observed and ruled, so far as the variations in relation to legal expenses were concerned:

“ In relation to the legal expenses, I bear in mind that it has been a period of 5 months since the grant of the injunction, until November 2017. If the matter had come before me as to the amount to be allowed for legal expenses in the first place, I would have considered that $200,000 a month for 3 defendants would have been reasonable.

So in relation to this provision for legal costs, what I am going to allow is leave to the defendants to withdraw a total sum of, I would say, 1 million for legal fees incurred up to 22 November.”

6.  The Variation Summons was supported by the 9^th affirmation of the 2^nd defendant filed on 30 January 2018.  He deposed, supported by breakdowns of legal fees prepared by the defendants’ solicitors, that the HK$1 million allowed by M Chan J had been exhausted (with outstanding fees of about HK$170,000 already incurred on top and payable).  That in fact was not inconsistent with the assessment made by M Chan J of HK$200,000 per month, with the sum of HK$1 million calculated on that basis “up to 22 November [2017]”.

7.  In his same affirmation, the 2^nd defendant further deposed that substantial further legal expenses will have to be incurred.  He outlined what legal steps they would be spent on.  Particulars of some of those legal costs are set out in a Skeleton Bill of Costs prepared by the defendants’ solicitors.

8.  In the circumstances, the defendants seek a variation so as to allow a lump sum of HK$2,000,000 be withdrawn by them for legal advice and representation up to the final determination of the Discharge Summons.

9.  I note that the ex parte Injunction is not issued in aid of any proprietary claim.  It is an “ordinary” Mareva injunction (as some authorities put it).

10.  As summarized in paragraph 29/1/79 of the Hong Kong Civil Procedure 2018:

“ Where the defendant seeks the release of funds subject to a Mareva injunction to meet certain expenses, the court should consider whether the defendant has shown by sufficient evidence that (a) he does not have other assets available to meet those expenses; and (b) the purpose of the application is not an attempt to dissipate the assets to frustrate the plaintiff’s enforcement of a judgment ….”

11.  On the evidence, I share the observation and finding made by M Chan J on 15 September 2017, that there is nothing at this stage which suggests that the defendants have access to other funds or assets to finance the requested expenses.

12.  Relevant to the second consideration, I have been referred to Wang Jian & Anor v Zhang Tien Feng &Ors HCA 607/2001 (unreported, 27 August 2001), where Recorder R Wong SC, having cited Cala Cristal SA v Emran Al-Borno (1994) The Times Law Report 251, observed at paragraph 16.6 that:

“ Payment of moneys in legal costs is not, prima facie, dissipation. A defendant ought to be at liberty to defend himself, notwithstanding the grant of the injunction. Prima facie a defendant ought to be allowed to choose the legal representatives he thought best qualified to present his case and to pay them such charges as may be properly payable as a matter of contract. It does not lie in the mouth of a plaintiff to say that the defendants ought to have gone to a cheaper firm of solicitors.”

I agree with those observations.

13.  I find that the defendants have made out their case for variation of the ex parte Injunction.

14.  On the issue of quantum, Mr Chung, counsel for the plaintiff, suggested that the sum of HK$500,000 should be sufficient for the defendants’ purpose.  Bearing in mind the considerations explained in Wang Jian, and also the fact that the amount which the defendants are seeking are supportedby the breakdowns and Skeleton Bill of Costs, I do not find it right to simply override the amount requested with what is in effect an arbitrary figure suggested on behalf of the plaintiff.

15.  The other variations which the defendants are seeking are really clarification in nature, so that the aggregate of the monthly sums which the three defendants could each withdraw for living expenses (as permitted by M Chan J) can be withdrawn monthly by the defendants jointly and severally.

16.  At the end of the hearing on 1 February 2018, I made an order in terms of the variations as set out on the Variation Summons.  I indicated that I would give my reasons in due course.  This I have now done.

17.  In respect of the application for adjournment, I also allowed it at the conclusion of the hearing.  My reasons are as follows. 

18.  As has been mentioned above, the 2^nd defendant in his 9^th affirmation confirmed that the legal fees which M Chan J allowed them touse had been exhausted.  The proceedings which the defendants are facing are of some complexity.  The 3^rd defendant has, in her 3^rd affirmation dated 30 January 2018 filed in support of their application for adjournment, gone into some details as to what steps they have taken in the conduct of the proceedings and what further steps they will take in the future.  I do not want to prejudge those matters, as no doubt they will come back before me in due course.  It can be suggested that the Variation Summons ought to have been taken out earlier.  That may well be so, but it will still be harsh to shut the defendants out all together at this stage in the face of their affirmatory evidence that their preparation of the various summonses and applications has been hampered by lack of funds.  The fairness which I intend to achieve by allowing the Variation Summons could also be completely undone if I were to refuse the application for adjournment.

19.  I note further that the plaintiff is a bank.  I have asked Mr Chung whether his client might suffer any prejudice should the various summonses be adjourned.  Mr Chung submitted that the plaintiff ought not to be delayed from enjoying the fruit of its successful litigation in the Mainland.  Whilst that is no doubt true, such prejudice is general in nature, and is much less significant compared with any prejudice which the defendants may suffer if they were to be unfairly shut out at this stage.  In any event, any general prejudice which the plaintiff may suffer can be compensated with costs.

20.  In the end, and for the above reasons which I have now stated, I also allowed the application for adjournment. 

21.  With the adjournment, I have also given some directions on the hearing dates and the filing of further evidence in relation to the Setting Aside Summons.  That being the case, the order sought under the Further Evidence Summons was no longer necessary.  Mr Kok agreed that it should in the circumstances be dismissed, and I so ordered.

22.  In respect of costs, I order that costs occasioned by the adjournment of the various summonses be paid by the defendants to the plaintiff, to be summarily assessed.